USD/JPY: still a case for a higher USD - Danske Bank

Analysts from Danske Bank still see a case for a higher USD/JPY in the medium term and they have a target at 115 in 6M and 116 in 12M.

Key Quotes: 

“USD/JPY initially broke above 114 as exit polls began to signal a clear Abe win on the election evening (CET). The relief rally faded quite quickly though, and USD/JPY dropped back below 114 again. USD/JPY remains highly correlated with yields on 10Y US government bonds and risk appetite. Further escalation in the tensions between the US and North Korea could initially lead to JPY appreciation via the risk channel.”

“Fundamentally, we still see a case for a higher USD/JPY in the medium term, driven by Fed-BoJ divergence, higher global yields (eventually) supported by global growth recovery and portfolio outflow out of Japan. We target USD/JPY at 115 in 6M and 116 in 12M.”